Mortgage rates improved this past week as investors were spooked by the crisis in Eastern Europe. Fixed rates are likely to rise in the next report, though the jobs report could change that.
In its Primary Mortgage Market Survey for the week ended March 6, Freddie Mac reported average 30-year fixed rates at 4.28 percent.
Long-term mortgage rates improved from a week earlier, when they averaged 4.37 percent, but weren’t as good as 3.52 percent in the same week last year.
“Mortgage rates were down this week as real GDP was revised downwards to 2.4 percent growth in the fourth quarter of 2013,” Freddie Mac Chief Economist Frank Nothaft said. “Fixed residential investment negatively contributed to GDP decreasing 8.7 percent in the fourth quarter. The private sector added an estimated 139,000 jobs in February, which was below the market consensus and followed a downward revision of 48,000 jobs in January, according to the ADP Research.”
Nothaft didn’t mention anything about the crisis in Ukraine, which initially had stocks selling off and bond yields falling as investors sought safe haven. Stocks firmed up, as did bond yields, after Russian President Vladimir Putin softened his rhetoric about taking action in Ukraine.
However, anxiety remains as the parliament of the Ukrainian territory of Crimea has voted to secede from Ukraine and join the Russian Federation.
Mortgage rates are likely to give up this week’s decline in Freddie’s next report based on Treasury market activity.
During the period when Freddie surveyed primary lenders this week, the yield on the 10-year Treasury note — a benchmark for fixed mortgage rates — averaged 2.67 percent, according to data provided by the Department of the Treasury. The 10-year yield closed at 2.74 percent Friday.
But another weak jobs report on Friday could wind up pulling rates lower. A nonfarm payroll increase of less than 150,000 jobs is generally considered weak.
A plurality of panelists — 60 percent — surveyed by Bankrate.com for the week March 6 to March 12 predicted mortgage rates won’t move more than 2 BPS during the next week, while 40 percent projected a decline, and none forecasted an increase.
The spread between conforming and jumbo mortgages increased to 6 BPS in the U.S. Mortgage Market Index report from LoanSifter and Mortgage Daily for the week ended Feb. 28 from 5 BPSÂ in the previous report.
At 3.32 percent, 15-year fixed rates were 7 BPS better than in Freddie’s survey for the week ended Feb. 27. Shorter-term mortgages were less appealing this week as the spread between 15- and 30-year mortgage rates narrowed to 96 BPS from 98 BPS in the previous report.
Freddie reported that five-year, Treasury-indexed, hybrid, adjustable-rate mortgages average 3.03 percent, 2 BPS less than in the previous report.
One-year Treasury-indexed ARMs averaged 2.52 percent in Freddie’s most recent survey, the same as a week earlier. But one-year ARM rates were lower than 2.63 percent in the week ended March 7, 2013.
Rates on one-year ARMs change based on the one-year Treasury yield, which closed Thursday at 0.12 percent, 1 basis point more than a week earlier, according to the Treasury Department.
Another index that is used on some subprime ARMs is the six-month London Interbank Offered Rate, which was 0.33 percent as of Wednesday, the same as the prior week, according to Bankrate.com.
ARM share was 13.7 percent in the most recent Mortgage Market Index report, up from 13.2 percent the prior week.
